Home Bancorp (HBCP) Q1 2026 Earnings Transcript

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DATE

Tuesday, April 21, 2026 at 11:30 a.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — John W. Bordelon
• Chief Financial Officer — David T. Kirkley

TAKEAWAYS

• Net Income -- $11.4 million, or $1.45 per share; up 6% year over year, down $0.01 sequentially.
• Net Interest Margin (NIM) -- 4.16%, increasing 10 basis points from the preceding quarter and 25 basis points year over year.
• Net Interest Income -- $34.5 million, an all-time quarterly high; up $434,000 sequentially and $2.8 million year over year.
• Return on Assets (ROA) -- 1.3% this quarter, with noted improvement over prior periods.
• Deposit Growth -- Total deposits increased $54 million (7% annualized), with core deposits up $118 million and noncore CDs down $64 million (CD decline offset core growth).
• Noninterest-bearing Deposits -- Increased $37 million quarter over quarter; now 27% of total deposits.
• Loans -- Total loans declined 1% quarter over quarter as paydowns exceeded new production; Texas loans now comprise 21% of portfolio, up from 15% at 2022 entry.
• Allowance for Loan Losses -- Rose to $33.1 million, or 1.23% of loans; provision expense $922,000, up from $480,000 prior quarter, attributed to downgraded credits.
• Nonperforming Assets (NPAs) -- Increased by $3.8 million driven by downgrade of three relationships; management expects related losses to be immaterial due to collateral and guarantor support.
• Net Charge-offs -- Remained low at 6 basis points annualized.
• Tangible Book Value per Share -- Rose to $46.04, up almost $5, or 15%, from the comparable quarter in 2025.
• Funding Costs -- Overall cost of deposits decreased 16 basis points to 1.68%, with cost of interest-bearing deposits down 22 basis points to 2.29%; overall cost now less than half the Fed funds target rate.
• FHLB Advances -- Fully repaid during the quarter; balance declined materially from $175 million at prior year-end to zero.
• Loan Production Rate -- CFO Kirkley stated average rate on new production is "about 7%".
• Loan Pipeline -- Increased by $30 million from December to $122 million as of March.
• Noninterest Income -- Decreased by $260,000 to $3.7 million this quarter; primarily due to lower other income and bank card fees; management expects future quarters in $3.8 million–$4 million range.
• Noninterest Expense -- Declined by $106,000 to $22.9 million; expected to rise to between $23.3 million and $23.7 million from Q2 onward as compensation and technology investments increase.
• Dividend and Share Repurchases -- Quarterly dividend increased by more than 50% since 2019; 17% of shares repurchased since then.
• Commercial and Industrial (C&I) Utilization -- Management cited a 400-basis-point decline in utilization this quarter, attributed to lower demand and competitive market dynamics.

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RISKS

• Nonperforming assets rose by $3.8 million due to delayed resolution of classified credits, with management noting, "3 years is the time it's taking to run these special assets through the process."
• Management cited that loan balances declined 1% as "paydowns continued to outpace new production" and customers delayed projects amid interest rate uncertainty.
• Noninterest income was "slightly below expectations" this quarter, primarily driven by lower other income and bank card fees, as explicitly stated by CFO Kirkley.

SUMMARY

Management emphasized continued deposit growth and lower funding costs as contributors to net interest margin expansion, with NIM reaching 4.16% and core deposits climbing $118 million. The loan pipeline increased by $30 million versus December, but overall loan balances declined 1% as paydowns remained elevated and customer loan demand lagged amid market uncertainty. Nonperforming assets increased due to downgrades, yet management asserted potential losses are expected to be immaterial, citing collateral and guarantor support. Shareholder return metrics advanced, including a tangible book value per share improvement of 15% and a more-than-50% dividend increase since 2019.

• New Northwest Houston branch added full-service capability in a high-growth market, expanding the company's Texas footprint to 21% of loans.
• Management reiterated appetite for merger-and-acquisition activity, noting "we think we can do a deal this year" due to share price valuation and past capital strategy.
• John Bordelon highlighted that cost of deposits is "less than half of the current Fed funds target rate," and deposit rates "probably around their floor." absent Federal Reserve rate cuts.
• Loan production is being maintained at "attractive spreads" with cash flow on new originations picking up about 40 basis points over paydowns, according to management.

INDUSTRY GLOSSARY

• Noncore CDs: Time deposits held primarily by non-relationship or rate-sensitive customers, often more volatile in balances and pricing.
• FHLB Advances: Borrowings from the Federal Home Loan Bank, typically used by banks as a secondary funding source.
• NIM Expansion: Increase in net interest margin, reflecting improving profitability of interest-generating activities relative to funding costs.
• Noninterest-bearing Deposits: Customer deposit accounts that do not pay interest, contributing to lower funding costs for banks.
• C&I Utilization: The percentage of committed commercial and industrial lines of credit currently drawn by customers.

Full Conference Call Transcript

John Bordelon: Thanks, David. Good morning, and thank you for joining our earnings call today. We appreciate your interest in Home Bancorp as we discuss our results, expectations for the future and our approach to creating long-term shareholder value. Yesterday afternoon, we reported first quarter net income of $11.4 million or $1.46 per share -- sorry, $1.45 per share. Earnings per share were down $0.01 for the fourth quarter, but increased 6% from a year ago and represented a good start to the year. Net interest margin expanded to 4.16% which was 10 basis points higher than the fourth quarter and 25 basis points higher than a year ago. Return on assets also increased to [ 1.3% ] in the first quarter.

This quarter, margin expansion was driven by a 22 basis point decline in our cost of funds, which contributed to a 25 basis point decline in our overall cost of funds. Loans declined by 1% in the first quarter as paydowns continued to outpace new production. We continue to see customers delay projects and transactions while they wait for additional clarity on interest rates. Despite the low balances, we maintained pricing and structure discipline continue to generate new loan originations at attractive spreads and risk-adjusted returns. Our loan pipeline has improved in recent months, although the timing and pace of future loan growth remain difficult to predict, given continued market volatility and uncertainty around interest rates.

Total deposits increased by $54 million in the quarter or 7% annualized as core deposits increased $118 million and were offset by noncore CD declines of $64 million. Noninterest-bearing deposits increased $37 million and continue to represent 27% of our total deposits. As a result of our success on the deposit front, our loan-to-deposit ratio declined to approximately 90% and positioning us well for future growth. The strength of our franchise is especially evident when you consider how we performed despite a challenging rate and economic environment. Over the past 2 years, diluted earnings per share have increased by more than 25%. Return on assets has improved by nearly 20%.

Net interest margin has expanded by more than 50 basis points and our cost of deposits has declined by more than 100 basis points. We also continue to have success in Texas with loans that are growing to approximately 21% of our total portfolio compared to 15% when we entered the market through an acquisition in 2022. The new Northwest Houston branch opened during the quarter and gives us full service presence in one of the fastest-growing areas in the market. The branch square footage allows for significant growth in the region and will help our well-established commercial team continue to build our franchise. Several organizations have already requested to utilize the branch meeting rooms for their companies.

The combination of the branch, its location and our team of bankers should make the Tomball region very successful. Credit remains manageable. Nonperforming assets increased during the quarter by $3.8 million primarily due to the downgrade of 3 relationships. However, we continue to believe losses of these credits will be immaterial given the collateral protection and guarantor support. Our net charge-offs remain extremely low at just 6 basis points annualized. Finally, we're in the middle of our annual business to all markets and hosting our [indiscernible] crawfish boils, as we've done in previous years, executives [indiscernible] with all the fixing and refreshments, reflecting our culture of servant leadership that is such an important driver of our success.

These gatherings are a great way to embrace that culture and generate enthusiasm. The time of the branches also gives management an opportunity to answer questions from frontline staff and meet customers both big and small. With that, I'll turn it back over to David, our Chief Financial Officer.

David Kirkley: Thanks, John. Please feel free to refer to the investor presentation we have provided, as I discuss the company's first quarter financial results. Net interest income totaled $34.5 million in the first quarter, an increase of $434,000 from the fourth quarter and $2.8 million from a year ago. This was the highest quarterly net interest income in Home Bank's history and was driven by both lower funding costs and materially improved balance sheet structure. Slide 20 of the presentation has a 2-year history of the yields that drive net interest income and NIM. And you can see the progress we've made bringing funding costs down while keeping loan yields relatively stable.

The cost of interest-bearing liabilities peaked in the third quarter of 2024 and has come down 64 basis points as we proactively reduced our exposure to higher cost funding. Over the same period, disciplined underwriting and loan portfolio comprised of 56% fixed rate loans have enabled us to maintain our loan yield within 12 basis points of the peak reached in the third quarter last year. And we're still making progress. In the first quarter, the average cost of interest-bearing deposits declined 22 basis points to 2.29%, while our overall cost of deposits declined by 16 basis points to 1.68%, which is less than half of the current Fed funds target rate.

During the quarter, we had strong deposit growth of $54 million or 7% annualized despite a $64 million reduction in CDs of which 70% were noncore CD customers. The decline in CD funding was offset by growth in lower-cost relationship-based nonmaturity deposits. Seasonal fluctuations in public deposits of $43 million contributed to the $118 million growth in non-maturity deposits during the quarter. We had solid growth in noninterest-bearing deposits which increased $37 million quarter-over-quarter and $75 million year-over-year and represent 27% of total deposits.

Finally, due to our success in growing core deposits, we were able to repay all of our more expensive FHLB advances which is a minor improvement of $3 million in quarter over quarter with a material improvement compared to the $175 million in advances we carried at year-end 2024. Given our lower cost of funds and the repricing opportunities in earning assets, we continue to readvance additional opportunity for NIM expansion. Slide 14 details expected repricing opportunities from our loans and investments over time. We continue to see a positive spread of approximately 40 basis points on new loan originations versus pay downs.

New investment yields were north of 4% in Q1 versus expected roll-off yield of 2.43% over the next 12 months. Slide 15 and 16 of the presentation provides some additional detail on credit. Nonperforming loans increased $1.6 million to $35.8 million or 1.31% of total loans. This was primarily due to the downgrade of 3 relationships with the largest being $1.4 million, partially offset by the foreclosure of a $2.6 million property in Houston. We recorded a provision expense of $922,000 in the quarter compared to $480,000 in the fourth quarter. The increase was primarily due to changes in individual declared reserves associated with these downgraded credits.

Our allowance for loan losses increased to $33.1 million or 1.23% of loans and we continue to feel very confident in our reserve levels. Slide 22 of the presentation has some additional detail on noninterest income and expenses. Noninterest income decreased by $260,000 to $3.7 million, which was slightly below expectations due to lower other income and bank card fees. We continue to expect quarterly noninterest income to be in the range of $3.8 million to $4 million. Noninterest expense declined by $106,000 to $22.9 million and was in line with expectations. We continue to expect noninterest expense to increase modestly beginning in the second quarter as annual raises take effect and technology investments ramp up.

For the remainder of 2026, we expect quarterly noninterest expenses to be between [ $23.3 million ] and $23.7 million. Slides 23 and 24 summarized the impact our capital management strategy has had on Home Bank. Since 2019, we have increased adjusted tangible book value per share at an annualized rate of approximately 9.7%, increased EPS at more than 11% annualized rate. increased our quarterly dividend by more than 50% and repurchased approximately 17% of our shares. Tangible book value per share increased to $46.04 this quarter, up almost $5 or 15% from the first quarter of 2025. And with that, operator, please open the line for some Q&A.

Operator: [Operator Instructions] And your first question comes from the line of Stephen Scouten from Piper Sandler.

Stephen Scouten: I'm curious -- and apologies if I missed any color you gave already, David. But in terms of the NIM trajectory from here, if we were to get no cuts, how does that affect kind of I think some of your previous statements of expecting expansion for the remainder of '26. Does that actually improve that expectation or make you a little more bullish given your asset-sensitive nature? Or how do you think about the NIM with this rate environment?

David Kirkley: I think, as I mentioned, we have a lot of opportunity for repricing in both the loan and investment securities portfolio. And you'll see that with -- you've seen that with our stable loan yield and slightly increasing investments. So I still think without any rate cuts, we're still seeing expansion in our loan yield on picking up about 40 basis points on cash flow versus new originations. I think that deposits are probably without any further rate cuts probably around their floor. So I still think that there is opportunity without any great cuts for expanded NIM.

John Bordelon: I would just add that the deposit side probably will dictate the pace of the growth of that NIM. We know that we have loans repricing. But assuming rates stay where they are, I'm not sure exactly where deposit rates are going to have to go for us to sustain the level that we have today.

Stephen Scouten: Yes, that makes sense. And then could you give a little bit of color on kind of what you saw from a production standpoint on the loans on maybe customer demand throughout the quarter. I know you mentioned the strength in the Texas market. I think you said 3% growth there, but kind of how maybe that demand segmented by time of the month as well as those different markets?

John Bordelon: Yes. The demand, of course, the last 3 quarters, second, third and fourth of last year were, I guess, really hurt by some pay downs, companies selling businesses, selling whatever. This first quarter was very typical of previous quarters other than the last 3 years, first quarter -- I mean, first quarter typically are relatively flat and people kind of getting their footing and moving forward. The last 3 years, though, first quarter was much more productive. So I think this is a more natural period where I think we're looking for lower interest rates, they realized we're not going to get it. So I think we'll see higher demand potentially in second and third quarter.

Assuming also geopolitical issues throughout the world are not slowing that demand.

Stephen Scouten: Makes sense. Makes sense. Okay. And maybe just last thing for me. I'm curious, obviously, the stock has had a really nice run over the last 5 years or what have you, does that allow for any potential M&A conversations to pick up or escalate -- or conversely, if nothing is able to happen, do you at any point, start to think about partnering with a larger institution?

John Bordelon: Absolutely. I think M&A will come a little more into focus. What we did look at over the last 3 years, more so were smaller transactions because we did not have the commodity to be able to utilize our stock. So I think with our stock price trading most of the 140 of tangible, we think we can do a deal this year. So potentially something a little more size than what we've been looking at for the last 3 years.

Operator: And your next question comes from the line of Joe Yanchunis from Raymond James.

Joseph Yanchunis: So a pretty good quarter on the deposit front. And as you discussed in your prepared remarks, the lowered cost improved funding mix, can you talk about what you're seeing in the market from a competitive standpoint?

John Bordelon: I would say going back to Q4, when we started seeing the rate cuts, a good portion of the banks did lower their deposit rates accordingly. There are a couple of -- and we did as well. we saw an outflow of CDs. I think I mentioned that dollar amount, and we lowered our CD rates. And so we did have some CD runoff from noncore customers. Looking at some of the competitive peer data, we did see a couple of outliers in the 4% range. And we had to adjust our CD rates up slightly. When I say slightly, I'm talking from 3.65% as our top rate to 3.85% in most markets.

And that stemmed the outflow of CDs for us a little bit. We are still seeing with rate expectations going cut rate going away. We have seen a couple of other competitors in Houston as well be a little bit more aggressive in the 4% to 4.25% range.

Joseph Yanchunis: I appreciate that. And David, just kind of going back to your expense guide. It sounds like you lowered your out-quarter expense guide from what you said on the prior quarter. Just wondering what's driving that decrease?

David Kirkley: Joe, I feel like it didn't change the guidance for the rest of 2026, I'll have to follow up with you individually on that. I feel like didn't change that guidance at all. So I'll have to connect with you.

Joseph Yanchunis: And just to be clear, you had said 23.3% to 23.7% is the kind of go-forward number?

David Kirkley: Yes.

Joseph Yanchunis: Got it. And then I kind of want to hit on the loan book a little one more time. So in your prepared remarks, you mentioned that the pipeline has improved I guess I was wondering, are you able to quantify the change in the pipeline versus the end of the December quarter? And then additionally, it looks like C&I utilization dipped about 400 basis points this quarter. In your view, what needs to happen to see some recovery there?

John Bordelon: Yes. I think one of the things that we focused on probably going back 2 years now is we're action in our appetite for nonowner-occupied. So what you've seen so far in 2026 first quarter was a reduction in those types of loans. There are some players out there that are very, very competitive on rates. And so we were able to hold on to those. So those are a lot of rental properties and things of that nature. So that's where our loan reduction is coming from. So we still have a decent pipeline, but we've lost -- I don't remember the number, Dave, man in those 2 categories yes.

So we anticipate that, that runoff maybe slows down a little bit, but -- and that will help us add balance in the second and third quarter, maybe even the fourth quarter, assuming the rate cuts. Rate cuts may even spur that on a little bit more on the oil side.

Joseph Yanchunis: Okay. I appreciate that. Then last one for me here.

David Kirkley: The pipeline increased about $30 million as of March compared to December.

Joseph Yanchunis: And what's the $30 million of what base, if you don't mind?

David Kirkley: To about $122 million.

Joseph Yanchunis: That's great, certainly from a percentage standpoint. And then last one for me. While relatively small, it looks like SBA volume has ticked higher this year, while the average deal size has been cut in half. versus 2025. Can you talk about your SBA strategy and how it's evolved?

John Bordelon: Yes. It's been a very slow process. We've looked at a lot of C&I-type loans on the SBA side. A lot of the brokers are taking some of the [indiscernible] type loans. We haven't -- I don't think we've originated any [indiscernible] loans in the last couple of years. So it's been very tough either they don't fit our appetite or very competitive bidding and the prices are such that we're not in. But -- that's something that we're actually discussing our strategy for SBA. It's not going to be a big part of our portfolio.

To be able to make it a big part of our portfolio, we would have to invest in a lot of lenders in that world. And we wanted to have that as a go-to but not necessarily drive for significant success.

Operator: [Operator Instructions] Your next question comes from the line of Feddie Strickland from Hovde.

Feddie Strickland: Just wanted to touch on loans first. David, I think you mentioned a 40 basis point pickup on loan yields, kind of the stuff is renewing. But I was curious, what's the average rate on new production today?

David Kirkley: About 7%.

Feddie Strickland: Okay. And then on the credit side, I was wondering if you could just walk through a little bit more of kind of maybe what's maybe in workout and maybe some changes that we could see later this year, just as you kind of work through the credit. So I appreciate that you've mentioned in the release that the losses should be immaterial, but just curious if we could maybe see a directional change in NPAs later this year.

John Bordelon: Well, I think the biggest issue that we've seen probably in the last 2 or 3 years is the time it's taking to run these special assets through the process. We had some that were working on in New Orleans that filed bankruptcy the day before the foreclosure. And so we're in year 2 of collections on that. Our oldest classified asset is trying to refinance outside and hopefully, that happens. But that's been a bad asset for 7 years.

So the longevity of these and our ability to get them and work them seems to be the biggest problem because once we get them, we can work them whether we take a loss or we're able to recover our load is irrelevant. We want to work and get them out and get that money back working. And it's just been a very low process over the last couple of years and getting that done. So that's why we're having a little bit more accumulation. It's not like we had that much in the quarter, $3 million additional, but we didn't have $3 million of runoff. That's the problem.

Feddie Strickland: Got it. And just another question on the deposit side. It was good to see solid DDA growth. Just curious, I know that's kind of tough in this environment with where you're sitting where they're at. But do you think there's an ability to continue to grow, [indiscernible] you see anything on the horizon that could lead that number to continue to climb higher?

John Bordelon: Yes. I think the biggest change for us has been attracting bankers that are more C&I-driven and so we're getting total relationships and some of those relationships come with very healthy deposits. And so as long as we continue to do that and for a long period of time, we were a CRE bank, and our focus changed about 4 years ago away from that to more of a C&I customer. And I think that's what you're seeing here is the influx of deposits, not necessarily big loan amounts.

Operator: [Operator Instructions] This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. John Bordelon for any closing remarks.

John Bordelon: Thank you all for joining us today. We appreciate your questions and your concern for Home Bancorp. We look forward to speaking to many of you in the coming days and weeks, and hope everyone has a wonderful week. Thank you very much.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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